Honest services fraud is a form of criminal activity that involves schemes to deprive another of the intangible right to honest services. This form of fraud was added in 1988 and expands the definition of “mail and wire fraud” to include schemes that attempt to deprive others of the intangible right of honest services (18 U.S.C. § 1346). The statute itself is brief and does not specify what exactly constitutes the “intangible right of honest services.”
At Stechschulte Nell, Attorneys at Law, our federal criminal defense practice follows many years of experience representing clients who faced indictment for many types of fraud. Because “honest services fraud” is poorly defined in the statute, experienced criminal defense lawyers know that the source of its application is the caselaw decided by the U.S. Circuit Courts of Appeals and the United States Supreme Court. Only by maintaining the highest degree of vigilance and staying up to date with the most recent court pronouncements will a federal criminal defense lawyer provide the sharpest and most reliable legal insight to their client.
If you need highly professional criminal defense in a federal honest services fraud case, contact Stechschulte Nell in Tampa today.
Honest Services Fraud Explained
Honest services fraud typically involves scenarios where a public official or a private individual in a position of trust and responsibility engages in corrupt practices or breaches their duty to provide “honest services” to the public or their employer. This can include fact patterns including bribery, kickbacks, or other forms of corruption where the accused uses their position for personal gain at the expense of the public or their employer’s interest.
The concept of honest services fraud was criticized from its first introduction because of its vagueness and the potential for prosecutorial overreach. However, the U.S. Supreme Court in Skilling v. United States (2010) held that the honest services fraud statute is limited only to schemes involving bribery or kickbacks. The decision clarified that not every unethical conduct or conflict of interest falls under the reach of the honest services fraud statute.
Requirements to Prosecute “Honest Services Fraud
To obtain a conviction for honest services fraud, the prosecution must prove beyond a reasonable doubt that the defendant engaged in a scheme to defraud involving a bribe or kickback. This requires demonstrating that the defendant intended to deprive another of the intangible right of honest services through deceitful or corrupt means.
What Does a Federal Prosecutor Need to Prove?
To convict a defendant for a violation of Section 1346, a federal prosecutor must prove the following elements beyond a reasonable doubt:
- A fiduciary duty is owed, such as to the public by a public official, to an employer by an employee, to the shareholders by a corporation, etc.); and
- The defendant knowingly devised or participated in a scheme to defraud, intended to deceive or cheat another and to deprive them of the intangible right to honest services through bribery or kickbacks; and
- The defendant did so with the intent to defraud; and
- The scheme to defraud involved a materially false or fraudulent pretense, representation, or promise, which may include an omission or the concealment of material information – information capable of influencing the decision of others.
For example, a mayor who accepted a bribe from a building contractor in exchange for awarding the building contractor a city contract over competing contractor bids would be subject to prosecution for violating the federal honest services fraud statute. In this example, the city is the party harmed by this scheme because the offending mayor breached their fiduciary duty owed to the city to negotiate with contractors submitting bids for the contract in good faith and at arm’s length. By accepting the bribe and awarding the contract to the party paying the bribe, the mayor breached their duty.
Honest services fraud charges have been brought against a variety of individuals, including public officials accused of accepting bribes in exchange for favorable decisions, executives who engage in self-dealing or embezzlement, and other scenarios in which a breach of fiduciary duty deprives an employer or the public of the right to honest services.
Penalties for Honest Services Fraud
A conviction under Section 1346, the honest services fraud section of the mail and wire fraud statute, carries a maximum sentence of 20 years in prison and fines of up to $250,000.
However, the prison sentence could be increased to 30 years and the fine to $1,000,000 if the crime is committed in circumstances involving any benefit related to a presidentially declared disaster or emergency, or if it involves a financial institution.
The sentence ultimately imposed will not necessarily be the maximum allowed under the law. Instead, the defendant’s role in the offense and the specific characteristics of the offense will impact their penalty if convicted.
A common sentencing enhancement is imposed when the defendant was an organizer or leader in criminal honest services fraud. Other factors could also result in a higher sentence, like the amount of loss, the number of victims, and the presence of a conscious or reckless risk of death or serious bodily injury.
On the other hand, defendants who played a minor or minimal role in the offense may qualify for a decrease in their penalty. The defendant’s criminal defense attorney must recognize that the defense bears the burden of proof in qualifying for a mitigating role reduction.
Defenses to Honest Services Fraud
The most effective defense strategy in each case depends on its individual facts and circumstances. In many cases, the defense might focus on the following:
- Challenging the evidence of a quid pro quo arrangement,
- The defendant’s lack of intent, or
- Disproving the applicability of the honest services fraud statute to the conduct in question.
Despite the court decisions rendered in honest services fraud prosecutions throughout the country, the law continues to involve complex legal principles that continue to be debated. As new cases are decided, the best criminal defense lawyers will adapt to new rulings and apply them for the benefit of their clients.
Protect Your Rights with Skilled Criminal Defense
Federal prosecutors will continue to explore the outer boundaries of the criminal statute’s reach and experienced federal fraud defense lawyers like our team at Stechschulte Nell Law will match them with effective counterarguments and sound legal authority as the law evolves.
If you need the experience and courtroom skill of a Florida criminal defense lawyer to defend a federal fraud indictment, call Stechschulte Nell, Attorneys at Law in Tampa, Orlando, or Miami.
